Why U.S. Bank’s credit card loan growth was moderate in 4Q14



Credit card loans are unsecured

Credit card loans are unique in the sense that they aren’t secured by any collateral or lien. As a result, the loans also have a higher interest rate. The higher interest rate accounts for the loans’ higher risks.

There are many types of credit cards available in the market. U.S. Bank provides most of the types of credit cards. To succeed in this high-risk credit card loan stream, banks need to manage customer relations better.

A better franchisee network, merchant linkages, and technology platforms are also advantages. Banks with these features tend to have better credit card loan streams.

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Credit card loans grew at a slow pace in 4Q14

U.S. Bank’s (USB) credit card loan book was $17,990 million at the end of 4Q14. Credit card loans accounted for nearly 7% of U.S. Bank’s total loan book. This was 3.6% growth—compared to 4Q13. Non-performing credit card loans were 0.16% of the total loans at the end of 4Q14. This was a big improvement over the 0.43% non-performing credit card loans in 4Q13. Most of the improvement is due to the improving economic environment.

JPMorgan Chase dominated

JPMorgan Chase (JPM) is the biggest credit card loan player. Bank of America (BAC) and Citibank are also strong national players in credit card loans. In recent years, Wells Fargo (WFC) has also been growing its credit card loan portfolio. All of these banks form a large portion of the Financial Select Sector SPDR (XLF).


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